Posted on 08.14.2018 by Chandana Sirimalwatte in Views with 0 Comments
The recent signing of a Free Trade Agreement between Sri Lanka and Singapore (SLSFTA) has led to much controversy. It is pertinent to examine the history of this Agreement before discussing its content and effects.
Prime Minister, Ranil Wickramasinghe declared the intention of entering into such an agreement when he visited Singapore around June 2016. In pursuance of that intention, negotiations were commenced in July 2016 under the Ministry of Development Strategy and International Trade. The Cabinet subcommittee on Economic Management at its meeting held on 20th December 2017 had given instructions to Malik Samarawickrame, the Minister of Development Strategy and International Trade to submit the Draft Agreement to the Cabinet of Ministers for approval prior to the visit of the Prime Minister of Singapore, scheduled for 22nd January 2018. This is revealed by a letter dated 22.12.2017 issued to Chandanie Wijayawardhana, Secretary to the Ministry of Development Strategy and International Trade by the Secretary to the Prime Minister. Minutes of the Cabinet subcommittee meeting held on 20th December 2017 were referred to in the said letter. Chandanie Wijayawardhana, the said Ministry Secretary, had submitted a Cabinet Paper bearing the same date (22.12.2017) with a copy of the Draft Free Trade Agreement. According to the letter of the Secretary to the Cabinet, dated 17.01.2018, the said Cabinet Paper had been submitted by Minister Samarawickrame to the Cabinet of Ministers on 9th January 2018.
According to another letter of the Secretary to the Cabinet, dated 17.01.2018, the Cabinet, having considered the Draft along with observations submitted by President Maithripala Sirisena and several other Ministers, had directed Chandanie Wijayawardhana, the relevant Ministry Secretary, to amend the Draft taking note of the observations made by the President and other Ministers and to obtain clearance from the Attorney General in respect of the amended Draft drawing his attention particularly to provisions regarding Arbitration contained therein. The Secretary, thereafter was required to submit the finalized Agreement to the Cabinet through the Minister for consideration.
Neither the Minister nor the Secretary complied with those directions. No amended draft had been submitted to the Cabinet with clearance obtained from the Attorney General. In fact there had been no Cabinet meetings between the 17th and 23rd January 2018. Thus, Minister Malik Samarawickrame signed the SLSFTA with his Singaporean counterpart on 23rd January 2018 without obtaining Cabinet approval and in utter disregard of the specific directions given by the Cabinet.
The SLSFTA deals with trade in Goods and Services and is intended to establish a free trade area in terms of Article XXIV of GATT 1994 and Article V of GATS. The ostensible objectives of SLSFTA are to liberalize trade and investment between the parties. The SLSFTA consists of 17 Chapters and deals with Trade in Goods and Services, Investments, E-Commerce, Telecommunications, Economic and Technical Cooperation and Arbitration. It also includes Tariff Schedules and Commitments of the two countries.
It must be noted that the creation of such FTA’s are being promoted by the World Trade Organization (WTO) in furtherance of its Neoliberal objectives. As experience, international as well as local has amply demonstrated, such free trade agreements between countries with wide disparities in economic strength inevitably lead to gobbling up of the weaker economy by the stronger. The Indo-Lanka FTA of 1998 is an example of such a disadvantageous FTA, whereby several Lankan industries including notably, the incense sticks industry were completely obliterated due to the influx of cheaper similar products from India with the removal of tariffs, resulting in tens of thousands losing their livelihood. Ironically, “exports” of donkey meat to India were freed from customs duties. It is common knowledge that donkeys are not raised in Lanka for meat and those found in the Puttalam District belong to a protected endemic sub species.
Ninety nine percent (99%) of goods entering Singapore which has the most liberal economy in Asia are already exempt from custom duties. Therefore, no benefit could be gained by entering into an FTA with Singapore since almost any item which this country is either already exporting or hoping to export to Singapore would be duty free even without an FTA. On the other hand, the imposition of custom duty on goods imported from Singapore helps to protect local producers, especially the small and medium scale producers. Prior to the Agreement duties were imposed on goods imported from Singapore under 7041 heads. From the moment of signing the FTA, 50% of those would be removed while 15% more would be removed in six years’ time and a further 15% would be removed in another six years’ time. Thus there would be an 80% reduction of custom duty on goods imported from Singapore by the year 2030. This would adversely affect the Lankan economy not only by the reduction of income through customs duty, but also through destruction of local producers, especially the small and medium scale manufacturers due to availability on the market of competing goods at cheaper prices. The futility of entering into a FTA with Singapore with the objective of boosting exports is confirmed by the vast trade gap between Lanka and Singapore. In 2015, goods valued at $923 million were imported from Singapore while only $185 million worth of goods were exported to Singapore.
The other most serious issue is the opening given for Singaporeans to work here in the fields of Laboratory work, Sports and Entertainment (which could include Media, Arts, and areas ancillary thereto), Maritime Industries and Environmental Services. The irony of it is that there isn’t any dearth of professionals in any of those fields in this country. With regard to the Service Sector ,it is important to note that the term “national” is defined in Article 1.3 of SLSFTA to mean “citizens of Singapore and permanent residents of Singapore”, thereby opening the door for citizens of other countries too to gain access to the Lankan job market in the guise of being permanent residents of Singapore. All those provisions would lead to job insecurity for Lankans.
We call upon the small and medium scale manufacturers, professionals and workers to come forward to defeat this highly detrimental Free Trade Agreement.